Move product and make quota at all costs. This is how Sales Professionals are incentivized.
It is no wonder then, Sales tends to stuff the channels. They are provided all the short term incentives to do so.
This method is opposite of how the company as a whole would like to operate. The company as a whole would like new customers, organic growth, sustainability.
Channel stuffing causes volatility and becomes unpredictable. You begin to lose control and have big swings in business. This is not good for a commissions, quota, and is undesirable in the eyes of investors.
So when the company has a few good quarters, then one terrible quarter, the question isn’t why did we miss this quarter. It is understanding why product did not move off the shelf in that particular quarter.
If you look back at the channel stuffer, and see sales are increasing, but there are no new customers, the answer is pretty clear. The product needed to go somewhere.
Channel stuffing only works for a short period. Whether you are selling directly to end customers, or it’s your distributors ability to move product, you can only stuff the channels for so long.
Channel stuffing can become rampant within an organization for two reasons:
- Compensation encourages it
- Sales professionals are untrained in helping customers use more product
In the first scenario, it’s not the Sales Professional that is to blame for stuffing the channels. Their compensation is set up to encourage this behavior. When bonus is achieved based upon percent to monthly quota, the Sales Professional will naturally do anything possible to get to that number this quarter. They will not worry about next quarter. It is short term thinking.
In the second scenario, it is upon the sales professional to train their customers to use more product. They need to help the customers build their business, which in turn builds their business. This means the Sales Professional needs to be forward thinking, and understand the customer or distributor needs product training. This is the win—win principle.
If your business is volatile, with rampant channel stuffing, possibly it is time to look at the system, not the people.
Good luck and good selling!